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January 07, 2015

COA holds municipalities may provide electrical delivery services to customers outside of city limits so long as another utility company is not presently providing such services

The Michigan Court of Appeals in the consolidated opinions of Holland v. Consumers Energy Corp. No 315541 and City of Coldwater v. Consumers Energy, No 320181 held that a customer receiving electrical services by a municipality outside of that municipality's boundary is lawful provided that no other utility company was presently providing the services. Further, the Court held that the Michigan Public Service Commission ("PSC") has no authority to regulate municipal distribution of electrical services.
 
In both cases, electrical customers outside of the corporate limits of Holland and the City of Coldwater opted to receive electricity from those municipalities rather than from Consumers Energy. Consumers argued that under MCL 124.3 a municipal corporation could not render electric delivery services for heat, power, or light to customers outside the corporate limits already receiving the services from another utility. Consumers maintained that it previously provided such services to the customers, thus, the municipalities were prohibited by statute from providing the customers with their electrical services. Consumers also argued that under PSC Rule 411, the first utility company serving a customer is entitled to continue serving that customer.
 
The Court disagreed. It first held that MCL 124.3 only prohibits a municipality from providing electrical services to a customer outside of the municipal limits when another provider is presently providing services. In both cases Consumers had previously provided services but was not currently delivering electricity. Therefore, both municipalities were lawful in serving the customers.
 
The Court then held that the PSC does not have the authority to regulate a municipality, thus the PSC's rules do not govern municipally provided utilities.  Citing MCL 460.6, which states that the PSC has complete power and jurisdiction to regulate all public utilities except a municipally owned utility, the Court held that PSC Rule 411 did not apply to either municipality, thus Holland and the City of Coldwater could continue providing electrical services to the customers.

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